Murray Keith V. Davidson Chalmers And Others
| Jurisdiction | Scotland |
| Judge | Lady Cosgrove,Lord Justice Clerk,Lord Wheatley |
| Date | 21 August 2003 |
| Court | Court of Session |
| Published date | 21 August 2003 |
| SECOND DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Justice Clerk Lady Cosgrove Lord Wheatley
| OPINION OF THE COURT delivered by LORD WHEATLEY in RECLAIMING MOTION by MURRAY KEITH Pursuer and Reclaimer; against DAVIDSON CHALMERS and OTHERS Defenders and Respondents: _______ |
Act: Sandison; Boyds (Pursuer and Reclaimer)
Alt: Williamson Q.C., Solicitor Advocate; Brodies, W.S. (Defenders and Respondents)
21 August 2003
[1]In this action the pursuer seeks damages for financial loss said to have been caused by the professional negligence of the defenders, who are a firm of solicitors. The pursuer was a director and employee of a company called Argyll Property Assets Managers Ltd ("Argyll") which is in the business of dealing in property assets for various clients. In the early part of 1997, the pursuer wished to leave his employment and set up a similar business of his own. In anticipation of this step, he sought professional advice from the defenders and in particular from Stuart Duncan, one of the partners at the defenders' firm. The details of the advice sought by the pursuer, and the occasions when he did so, lie at the heart of this present dispute. In particular, the basis of the pursuer's present claim is that the defenders were professionally negligent in that they failed to advise the pursuer of the nature and extent of the fiduciary duties incumbent upon him as a director and employee of Argyll, and as a consequence of that failure he embarked upon a course of action which led him to suffer financial loss.
[2]A summary of the detailed history of events as found by the Lord Ordinary is as follows. A meeting between the pursuer and Mr Duncan was proposed by a letter from the pursuer of 17 March 1997, which also advised the defenders of the provisional name of the company which the pursuer proposed to set up, and provided a copy of the pursuer's business plan. The meeting took place on 18 April 1997. The Lord Ordinary has made specific findings in fact in respect of what was discussed between the pursuer and Mr Duncan at that meeting, preferring in general terms the recollection of Mr Duncan to that of the pursuer. The pursuer made Mr Duncan aware of the general outline of what he proposed to do, that he was a director of Argyll, and that he did not at that time intend to resign from that position. In particular, the pursuer indicated that, together with another of Argyll's employees named Steven Doyle, he intended to set up a new company to be called Leven Properties Ltd ("Leven") as the corporate vehicle for his new venture. Mr Duncan was therefore instructed to see to the incorporation of Leven, to investigate the pursuer's service contract agreement with Argyll (which the pursuer was to send him), and to prepare material for potential investors in the new company. The discussions between the pursuer and Mr Duncan at this meeting envisaged a lapse of time of perhaps six months between the stage when the pursuer would find the necessary commitment by financial investors to provide working capital on the one hand, and the stage when Leven would then take up the offer of funding and acquire property on the other. There was no discussion on 18 April about the fiduciary duties that might be incumbent upon the pursuer as a director of Argyll in relation to setting up what was in effect a rival company, or about the consequences to the pursuer of any breach of such duties. All that Mr Duncan provided by way of advice was that the pursuer should be careful about disclosing his plans to Argyll. However, the Lord Ordinary also concluded that Mr Duncan reasonably understood at this time that the pursuer intended to resign from Argyll before he started trading in his new company.
[3]The next contact between the pursuer and Mr Duncan was on 19 June 1997. In the course of a telephone conversation, the pursuer reported to Mr Duncan on the progress he was making with his attempts to arrange funding in principle for the new venture (the first part of the two stages contemplated at the meeting of 11 April), and indicated that such funding had now been secured. The Lord Ordinary notes that neither the pursuer nor Mr Duncan had much recollection of this telephone conversation, nor did they place any emphasis or significance on it either at the time or at proof. However, also at or about that time, in the middle of June 1997, the pursuer and Steven Doyle had identified a significant property portfolio which they understood was being offered for sale by the representative body of the Church in Wales, the purchase price for which was eventually settled at £27,625,000. These negotiations had proceeded outwith the knowledge of the pursuer's employers, and also outwith the knowledge of Mr Duncan and the defenders. At that time, the Lord Ordinary found that Mr Duncan was still reasonably of the view that there would be a considerable period of time between the identification by the pursuer of the source of funds for his new venture, and the presentation by the new company of concrete proposals to purchase a property portfolio with the aid of potential investors.
[4]The next and final contact between the pursuer and the defenders was on 21 August 1997, when the pursuer telephoned Mr Duncan and asked him for written confirmation of advice already tendered in respect of his service contract. Mr Duncan then wrote to the pursuer on 22 August giving him detailed advice on his service contract with Argyll, and on whether that agreement would present the pursuer with any problems should be proceed with his new venture. Again, no advice was given in respect of any fiduciary duties of care which the pursuer might currently have in respect of his position with Argyll, or of the consequences of any breach of those duties.
[5]By the beginning of August it had been agreed in principle that Leven would acquire the Church in Wales property portfolio at the settled price. Leven also obtained from the sellers of the portfolio an exclusivity agreement until the end of October 1997. In the event Leven was unable to fund the purchase of the portfolio and in the course of October a third party acquired the interest of the pursuer and Mr Doyle in Leven, including the exclusivity agreement, and subsequently the property portfolio itself. The third party then sold on the portfolio at a significant profit. For various reasons described by the Lord Ordinary in his opinion, the purchase price in the transaction in which their interest in Leven was sold by the pursuer and Steven Doyle to the third party was eventually calculated at £872,500. In the course of these various dealings, the pursuer and Steven Doyle had set up another company called Talisker Properties Ltd ("Talisker") in circumstances and for reasons which are not particularly clear. The purchase price for Leven was paid to Talisker. Throughout this course of dealing the pursuer and Doyle remained employees of Argyll, and kept all knowledge of what they were doing in respect of the purchase of the property portfolio from their employers.
[6]In November 1997, Argyll became aware of the full circumstances of the acquisition of the Church in Wales portfolio and raised an action against the pursuer and Mr Doyle, jointly and severally, for the sum of £800,000 for breach of their contracts of employment, and also for count and reckoning with the pursuer, Mr Doyle and Talisker on the basis inter alia that the profits made in the deal constituted a secret profit made by the pursuer in breach of the fiduciary duties he owed to Argyll. In the course of this action, the pursuer acknowledged that he was in breach of these fiduciary duties and the action was then settled in the sum of £100,000. This sum was in fact paid by Talisker. The pursuer appears to have entered into an undertaking to repay that sum to Talisker.
[7]It was in these circumstances that the pursuer raised the present action against the defenders. The pursuer's case was that he had instructed Mr Duncan in early 1997 to give advice in respect of whether the proposal to carry on his own business in the way he intended would expose him to the risk of any liability to Argyll. The pursuer averred that the defenders knew or ought to have known that they were being asked by the pursuer for legal advice on any liability to Argyll on his part, and on any other consequences which might flow from his proposal. This should have included the question of his fiduciary duties to Argyll as a director and employee of that company. The pursuer, in short, alleged that the defenders had been professionally negligent in that they failed to advise him of the nature and extent of these duties, and as a consequence of that failure the pursuer fell into breach of his obligations and required to compensate Argyll in the sum of £100,000.
[8]Against that background, the Lord Ordinary addressed the question of whether Mr Duncan had been guilty of professional negligence. He considered that the essence of the pursuer's case was that the defenders knew or ought to have known that the pursuer was looking for legal advice on any question of liability to Argyll on his part in view of what he proposed to do, and any other adverse consequences that might flow from his current and planned activities. In the light of that knowledge, the Lord Ordinary concluded that Mr Duncan should have been aware throughout of the need to draw the attention of the pursuer to the existence and incidents of the fiduciary duties owed by him as a director and employee of Argyll. However, having considered the evidence and submissions, the Lord Ordinary decided that the defenders were not guilty of professional negligence in respect of any failure to tender such advice to the pursuer on 18 April and 19 June 1997; and further concluded that while there was a failure to tender appropriate advice on 21 August 1997, that did not in the event lead to the pursuer...
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